Sanctions will not end the war

“If something is a law, it applies to everyone,” Inozemtsev said. For example, the exclusion of some Russian banks from the international payment system is inconsistent. Other banks, including Western banks, would do more business and continue paying taxes to the government to finance the war.

There are various options for leaving Russia legally and effectively. For example, management procurement where Russian leaders temporarily take over the business. In many cases, corporations have even acquired the right to buy back goods in view of the post-war period.

According to Inozemtsev, supporting the evacuation of critical resources, such as money and well-trained personnel, is more effective. A shortage of capital and skilled workers will cause lasting damage to the Russian economy. But Western governments achieve the opposite, especially in their focus on oligarchs.

If you want to try to build pressure on Russia, focusing on elites is also not useful. The group, much criticized in the West, could even find important allies in the medium term in the event of upheavals within the Russian elite. At the moment, however, many who have brought their money legally to the West over the years believe it.

Instead, the West can take measures that affect a large part of the population. For example, most brewing hops for Russian beer production are invariably imported from EU countries. Another possibility is access through Western companies. Smartphone manufacturers like Apple, for example, can block devices that dial from Russia. This would be more efficient than export controls bypassed through third countries, because no one would pay $1,000 for a non-functional “brick,” the economist argued.

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Geopolitical environment

Another problem Inozemtsev sees is that some actions are somewhat inconsistent with constitutional principles, for example, when individuals are punished for doing business with the Russian regime in the past. This creates the impression, especially in the Global South, that the West is not abiding by its own rules. Accordingly, it would be very difficult to assert that these are generally valid.

China’s influence in Russia has grown due to Western sanctions. On the one hand, it affects Russian energy exports and Chinese goods such as cars, some of which are marketed under Russian brand names.

Oil price ceiling

The West also miscalculated the price ceiling for Russian oil. Production costs were assumed to be around $50 per barrel. A $60 price ceiling would require Russia to continue bringing oil to the world market — because the alternative would have been a massive energy crisis — but earn less as a result. Problem: Companies’ financing costs are significantly lower. At $50, state taxes are already included, so money keeps flowing into the budget.

Of course there is one more specific effect. Because the profits of state-run energy companies have melted away in the last two years. For example, former cash cow Gazprom posted losses in 2023 for the first time in 25 years.

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